• Notification Date: 20-01-2025
• Notification No: N/A

Income Tax Budget 2025: What to Expect for Taxpayers and Urban Consumption

Before the much-awaited Union Budget announcement by Finance Minister Nirmala Sitharaman for FY 2025-26 on February 1, middle-class taxpayers as well as economic experts are upbeat that the policies will be presented to lighten cost burdens on them and spur fresh consumption in an urban scenario because demands in an urban scenario have been curbed post-COVID. The government is likely to announce more tax benefits aimed at boosting such consumption and boosting their economy.

An important expectation here is that the limit for the standard deduction under the old as well as the new tax regime needs to increase. Currently, a standard deduction of up to Rs 50,000 is allowed under the new regime, while a standard deduction to the extent of Rs 75,000 is allowed under it. It augments disposable income and encourages consumption in different areas of housing, consumer goods, and automobiles.

Experts are asking for readjustment of the income tax slabs in favor of salaried taxpayers, too. Says Suman Chowdhury, Chief Economist, Acuité Ratings, an increase in disposable incomes will be accompanied by increases in discretionary spends and that helps revive the slack in urban demand since the pandemic. That, he says, is a multiplier and gets those sectors moving that have been waiting with bated breath for consumer spending to start anew.

Retirees have highlighted that the recent changes in taxation on debt funds, which have now been exposed to long-term capital gains tax at the same rate as that of fixed deposits, should be exempted for a retiree above 60-65 years to give him an option for investment that is less risky. Pre-budget hopes were that the government, while formulating the new Direct Tax Code, would attempt to ease its tax burden so that the citizenry is also benefited, since it is proposed to simplify a 63-year-old Income Tax Act.